Justia Insurance Law Opinion Summaries

Lewis & Clark LTC Risk Retention Group, Inc. was placed into receivership and liquidation by the Nevada Commissioner of Insurance after financial distress. The Commissioner, acting as receiver, sued the company’s directors, alleging gross negligence and breaches of fiduciary duty relating to their management of the insurer. The allegations included knowingly relying on an unlicensed reinsurance broker, approving projects outside guidelines, operating the company in a hazardous condition, and violating Nevada statutes and regulations.After the directors moved for judgment on the pleadings, the Eighth Judicial District Court stayed proceedings while the directors petitioned for a writ of mandamus. The Supreme Court of Nevada, in Chur v. Eighth Judicial District Court, held that directors and officers can only be held personally liable for intentional misconduct, fraud, or knowing violations of the law, not gross negligence. The district court then denied the Commissioner leave to amend the complaint to meet this clarified standard, finding the amendment untimely, prejudicial, and futile, and entered judgment for the directors. The directors also moved for attorney fees and costs, which the district court denied, citing statutory immunity for the Commissioner.On appeal, the Supreme Court of Nevada found that Chur I represented a significant change in law and that, under Nevada Rules of Civil Procedure and in the interest of justice, leave to amend should have been granted. The district court abused its discretion by denying the amendment, as the proposed changes were not made in bad faith, were not unduly prejudicial, and were not futile. The Supreme Court reversed the judgment in favor of the directors, vacated the denial of attorney fees, and remanded for further proceedings consistent with these holdings. View "Commissioner of Insurance v. Chur" on Justia Law

Industrial Park Center LLC, operating as Mainspring Capital Group, owned a commercial building in Tempe, Arizona, insured under an all-risk property insurance policy issued by Great Northern Insurance Company. The building suffered structural damage attributed to years of water exposure from routine cleaning practices by a seafood distribution tenant. After an initial incident in 2010, Mainspring took several remediation steps but did not implement all recommended preventative measures. A subsequent episode of damage was discovered in 2021, leading Mainspring to file an insurance claim. Great Northern denied coverage, citing policy exclusions such as wear-and-tear and settling, and disputed whether the loss was “fortuitous.”Mainspring initiated suit in the Superior Court for Maricopa County, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. The case was removed to the United States District Court for the District of Arizona. Both parties moved for summary judgment. The district court granted summary judgment to Great Northern and denied Mainspring’s motion, concluding that the loss was not fortuitous, as it was “reasonably foreseeable and almost certain to occur” given the tenant’s ongoing practices and Mainspring’s failure to take all preventative steps. The district court also awarded Great Northern attorneys’ fees.Upon appeal, the United States Court of Appeals for the Ninth Circuit observed that Arizona law does not define “fortuitous” for insurance purposes. Recognizing the issue’s novelty and importance for public policy and contract interpretation, the Ninth Circuit certified the following question to the Arizona Supreme Court: Whether property damage is “fortuitous” when, based on the insured’s knowledge at the time the policy was issued, it was reasonably foreseeable that such damage was almost certain to occur if certain preventative measures were not taken. The court’s disposition was to certify this question, not to affirm, reverse, or vacate the lower court’s judgment. View "INDUSTRIAL PARK CENTER LLC V. GREAT NORTHERN INSURANCE COMPANY" on Justia Law

A New Mexico insurance company initiated a lawsuit in Nebraska against two insurance companies, asserting claims for contribution and indemnity. One defendant, a New York insurance company, moved to dismiss for lack of personal jurisdiction, while the other defendant, a surplus insurance company, challenged a default judgment and sought to file a responsive pleading. The district court in Douglas County issued separate orders: it dismissed the New York insurer with prejudice and set aside the default judgment against the other defendant, allowing additional proceedings.After the dismissal order concerning the New York insurer, the plaintiff appealed to the Nebraska Court of Appeals, which summarily dismissed the appeal for lack of jurisdiction. The case returned to the district court, where the plaintiff voluntarily dismissed its claims against the remaining defendant without prejudice. This second dismissal order did not reference the prior dismissal of the New York insurer. The plaintiff then filed another appeal, again challenging the earlier dismissal order. The Court of Appeals dismissed this second appeal for lack of appellate jurisdiction, citing the absence of a single judgment resolving all claims against all parties as required by Nebraska statutes and referencing the Nebraska Supreme Court’s decision in Elbert v. Keating, O’Gara. The plaintiff petitioned for further review.The Nebraska Supreme Court reviewed the case and held that, because the district court had not entered a single written judgment adjudicating all claims and all parties, nor certified any order as final under the applicable statute, there was no final, appealable order. Therefore, the Supreme Court determined it lacked appellate jurisdiction and affirmed the dismissal of the appeal by the Court of Appeals. The court emphasized that jurisdiction cannot be created by voluntary dismissal without prejudice of unresolved claims or parties in the absence of a final judgment. View "Continental Indem. Co. v. Starr Indem. & Liab. Co." on Justia Law

A driver, Ngoc Troung, was rear-ended by Marcus Sanders, whose vehicle was insured by Old American Indemnity Company. The impact rendered Troung’s vehicle inoperable, requiring repairs that included a new tire, exhaust system components, and other parts. The insurer initially paid for some repairs but later deducted $313.79 for “betterment”—a reduction based on the idea that new parts improved the vehicle beyond its pre-accident state. Troung had to pay this balance to retrieve his car and subsequently sued, arguing that Louisiana law does not allow for such deductions in third-party tort claims and seeking penalties for the insurer’s actions.The First Judicial District Court (trial court) held that betterment deductions were permissible because they were not expressly prohibited by Louisiana law or jurisprudence, and therefore did not consider Troung’s bad faith claims. On appeal, the Louisiana Court of Appeal, Second Circuit, reversed, finding that neither the law nor public policy allows a tortfeasor or insurer to reduce a not-at-fault party’s recovery for betterment in third-party tort claims. The appellate court also found the insurer acted in bad faith by imposing the betterment deduction and awarded statutory penalties.The Supreme Court of Louisiana reviewed the case on writ of certiorari. It affirmed the appellate court’s holding that Louisiana law does not permit a tortfeasor or their insurer to reduce a third-party tort victim’s property damage recovery by a betterment deduction. However, the Supreme Court reversed the award of penalties, concluding that the insurer’s conduct did not constitute a misrepresentation of pertinent facts and that penalties were not warranted because the legal issue was one of first impression. Thus, the Supreme Court affirmed in part and reversed in part. View "Troung v. Sanders" on Justia Law

Suzan Taylor sought property insurance for her home in Hot Springs, Arkansas, using an application form provided by her insurance agent. In her application, Taylor answered “no” to a question about whether she had experienced a foreclosure in the past five years, though she had owned another property, the Fairfield Bay Property, that was sold in a foreclosure sale in 2016. Hiscox, a capital provider to an underwriting syndicate at Lloyd's of London, issued her the policy through its authorized agent, Burns & Wilcox, Ltd. After a fire destroyed the insured home, Hiscox investigated and discovered Taylor’s failure to disclose the earlier foreclosure. Hiscox rescinded the policy ab initio, refunded the premium, and denied coverage for the fire loss.The United States District Court for the Western District of Arkansas initially granted summary judgment to Hiscox, concluding Taylor’s failure to disclose foreclosure proceedings on the insured property itself was a material misrepresentation. On appeal, the United States Court of Appeals for the Eighth Circuit held the term “foreclosure” as applied to the insured property was ambiguous, reversed the district court’s judgment, and remanded for further proceedings on other alleged misrepresentations. On remand, the district court determined that Taylor’s failure to disclose the foreclosure sale of the Fairfield Bay Property was a material misrepresentation and not ambiguous in this context. The court found that Hiscox’s agent did not acquire relevant knowledge of the foreclosure while acting for Hiscox, so Hiscox was not precluded from asserting the misrepresentation.The United States Court of Appeals for the Eighth Circuit affirmed the district court’s decision. The court held that Taylor’s failure to disclose the foreclosure was a material misrepresentation justifying rescission of the policy ab initio. The court also held that the policy’s Concealment or Fraud section independently precluded coverage due to Taylor’s false statement. Consequently, Taylor’s counterclaims for breach of contract and bad faith failed. View "Hiscox Dedicated Corp Member v. Taylor" on Justia Law

A passenger, after being injured in a hit-and-run rear-end collision while riding in a vehicle arranged through a rideshare application, sought damages for bodily injuries. The passenger alleged that the rideshare company, its subsidiary, and its insurer either provided or were required by law to provide uninsured motorist (UM) coverage, and that their rejection of such coverage violated Louisiana law.The action began in Louisiana state court, initially naming only the insurer as a defendant. The passenger later amended the complaint to add the rideshare company and its subsidiary, arguing that they were not permitted to reject UM coverage. With all defendants’ consent, the insurer removed the case to the United States District Court for the Eastern District of Louisiana, citing diversity jurisdiction. Multiple motions followed, including motions to dismiss by the rideshare entities and a motion for summary judgment by the insurer. The district court found that Louisiana statutes allow transportation network companies to reject UM coverage and that the defendants had properly done so. Accordingly, the district court dismissed all claims with prejudice and denied the passenger’s request to certify a question to the Louisiana Supreme Court.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the statutory interpretation de novo. The court concluded that Louisiana Revised Statute § 45:201.6 incorporates, by general reference, the provisions of § 22:1295, including the right to reject UM coverage. The court found support for this interpretation in state appellate decisions and statutory context. The Fifth Circuit affirmed the district court’s judgment and denied the motion to certify the question to the Louisiana Supreme Court. The holding is that transportation network companies in Louisiana may reject uninsured motorist coverage if they follow the procedures in § 22:1295. View "Guerrera v. United Financial Casualty Co." on Justia Law

A Texas-based firearms retailer sold and shipped large quantities of unfinished firearm frames and receivers to New York, including products easily convertible into untraceable “ghost guns.” State and city authorities in New York alleged that the retailer intentionally marketed and sold these products to purchasers likely to be legally prohibited from owning firearms. The authorities claimed this resulted in increased gun violence and compelled them to spend additional resources on law enforcement, public health, and community services.Following these lawsuits, the retailer demanded that its liability insurers provide defense and indemnification under policies that covered damages caused by an “accident.” The insurers denied coverage and sought a declaratory judgment in the United States District Court for the Southern District of New York, arguing that the underlying suits did not allege harm resulting from an “accident” as required under Texas law and the policies’ terms. The district court granted summary judgment for the insurers, finding that the complaints alleged intentional conduct with expected consequences, not an “accident.” The judgment also encompassed indemnification after the parties agreed that the same reasoning applied.The United States Court of Appeals for the Second Circuit reviewed the case de novo. It held that, under Texas law, the policies only covered injuries arising from an “accident,” which is defined as a fortuitous, unexpected, and unintended event. The Court concluded the underlying lawsuits described intentional acts by the retailer that led to expected injuries, rather than accidental harm. Therefore, the insurers had no duty to defend or indemnify the retailer in these lawsuits. The Court of Appeals affirmed the judgment of the district court. View "Granite State Insurance Co. v. Primary Arms, LLC" on Justia Law

A young man named Christoffer suffered a severe spinal cord injury in a friend’s home after ingesting what he believed to be LSD and a THC gummy. The incident occurred after he fell off a bed, followed by several hours during which he received no medical attention. Later, he was moved by his friends without stabilizing his neck or spine, which medical testimony suggested may have contributed to the severity of his injury, ultimately leaving him a quadriplegic. The circumstances involved both the use of alleged controlled substances and subsequent actions by others in the house.Christoffer and his family sued the homeowner’s son in Texas state court, prompting Occidental Fire & Casualty Company, the homeowner’s insurer, to seek a declaratory judgment in the U.S. District Court for the Southern District of Texas, arguing that their policy excluded coverage for injuries arising from the use of controlled substances. The parties settled the state lawsuit and stipulated that the sole fact issue for the federal jury was whether Christoffer’s injuries “arose out of the use by any person” of a controlled substance, as defined by federal law.The jury in the district court found that Christoffer’s injuries did not arise out of the use of a controlled substance, indicating that the policy exclusion did not apply. However, the district judge set aside the jury’s verdict and granted judgment as a matter of law for Occidental, concluding the evidence was insufficient to support the jury’s finding. On appeal, the United States Court of Appeals for the Fifth Circuit held that the district court erred, as there was a legally sufficient basis for a reasonable jury to find that the injury did not arise from drug use. The Fifth Circuit reversed the district court’s judgment and reinstated the jury’s verdict in favor of coverage. View "Occidental Fire v. Cox" on Justia Law

The dispute centers on insurance policies purchased by several Louisiana public entities, including the Town of Vinton, from a group of foreign and American insurers. The policies included an arbitration clause and a contract endorsement stating that each policy is a “separate contract” between the insured and each insurer. After alleged breaches, the insured entities sued all participating insurers in Louisiana state court. Subsequently, the insureds dismissed the foreign insurers with prejudice, leaving only American insurers as defendants.Following the dismissal of the foreign insurers, the remaining American insurers removed the cases to the United States District Court for the Western District of Louisiana. They sought to compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Federal Arbitration Act. The district court denied these motions, holding that the contract endorsement created separate agreements between each insurer and the insured, and, since the foreign insurers were no longer parties, no agreement involved a non-American party. The court also rejected the American insurers’ equitable estoppel argument, finding it precluded by Louisiana law, which expressly bars arbitration clauses in insurance contracts covering property in the state.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s decision. The Fifth Circuit held that the Convention does not apply because no foreign party remains in any agreement to arbitrate. The court further concluded that Louisiana law prohibits enforcement of arbitration clauses in these insurance contracts and that equitable estoppel cannot override this prohibition. Lastly, the court determined that the delegation clause in the arbitration agreement could not be enforced because Louisiana law prevents the valid formation of an arbitration agreement in this context. View "Town of Vinton v. Indian Harbor" on Justia Law

A dispute arose between the California FAIR Plan Association (CFPA), a statutorily created insurer of last resort, and the state’s Insurance Commissioner. The Commissioner issued an order in 2021 directing CFPA to submit a plan to offer and sell a comprehensive “Homeowners’ Policy” that included, among other coverages, premises liability and incidental workers’ compensation. CFPA challenged this order, contending that the Basic Property Insurance Law only required it to provide first-party property insurance—coverage for direct loss to property—not liability coverage or similar third-party protections.The Superior Court of Los Angeles County denied CFPA’s petition for a writ of mandate. The court found ambiguity in the statutory definition of “basic property insurance,” specifically in the phrase allowing for “other insurance coverages as may be added.” Deeming the term ambiguous, the court deferred to the Department of Insurance’s interpretation that allowed the Commissioner to require CFPA to offer additional coverages, including liability insurance, so long as such coverages had a connection to the insured property. The court relied in part on the longstanding approval of liability coverage in certain businessowner policies since the early 1990s.The California Court of Appeal, Second Appellate District, Division Three, reviewed the lower court’s decision de novo. It concluded that, while the statutory language was ambiguous, extrinsic evidence such as legislative history and statutory context demonstrated that the Legislature intended for CFPA to be limited to providing first-party property insurance. The court found no sufficient basis to defer to the Department of Insurance’s later-adopted interpretation that expanded coverage to liability. The Court of Appeal reversed the judgment and directed the trial court to grant CFPA’s petition for writ of mandate, holding that the Commissioner lacked authority under the Basic Property Insurance Law to require CFPA to offer liability coverage. View "California FAIR Plan Assn. v. Lara" on Justia Law